Trends and Analysis of Government Health Expenditure in Andhra Pradesh

Trends and Analysis of Government Expenditure in Andhra Pradesh Working Paper - WP 61/2006 THE INSTITUTE OF HEALTH SYSTEMS

Trends and Analysis of Government Expenditure in Andhra Pradesh C K George

Trends and Analysis of Government Expenditure in Andhra Pradesh I. Background Data from the State Accounts 1 and the Indian National Accounts 2 indicate a total health spending of Rs. 8998 crore in Andhra Pradesh in 2001-02. This works out to 5.94% of the GSDP. Government health expenditure which includes expenditure by central, state and local governments on provision of health services to the general population and health care of their employees account for 18.48% of the total health expenditure. Households contribute the major share and accounts for about 73% of the total health expenditure in the state. Funding by external sources which accounts for 3.72% of the total expenditure include external aid received by state government and nonprofit agencies. Spending by public and private enterprises on health care of their employees contribute to about 5% of the total health expenditure. Figure-1: Percent Distribution of Expenditure in AP by Source of Funds (2001-02) Central Government 7.29% External Sources 3.70% NGOs 0.10% State Government 10.89% Local Government 0.30% Public Sector Enterprises 2.30% Private Enterprises 2.60% Households 72.83% Source: Estimates of State Accounts for AP (2001-02) revised using household health expenditure data from the National Accounts India (2001-02) 1 George C.K and Pattnaik G.S. State Accounts for Andhra Pradesh, 2001-02, Institute of Systems, Hyderabad, 2004 2 National Accounts India 2001-02, Ministry of and Family Welfare, Government of India, 2006 1

It is seen that the major financial burden of ill health falls on the households. An analysis of financing of out of pocket expenses on hospitalization by economic status is revealing (Figure-2). The poor and the better off, both bear a substantial financial burden on account of out of pocket expenditure on hospitalization. While households APL are to some extent able to meet expenditure by dipping into their savings or being reimbursed by some form of insurance mechanism, BPL households resort to selling their assets and borrowing. The greater reliance of poor groups on borrowing, often at high rates of interest is more marked in rural areas of the State (76%) than urban areas (54.1%). 3 Figure-2: Financing Hospitalization Expenses in AP, by source and economic status Below Poverty Line Above Poverty Line Sell Assests 12.6% Other 6.1% Other 5.5% Sell Assests 6.0% Reimbursement 6.2% Borrow 31.5% Savings 12.0% Current Income 6.1% Borrow 63.1% Savings 41.6% Current Income 9.1% Source: Estimates based on NSS 52 nd Round as reported in IHSG (2003) A key health policy goal of the government is to alleviate the heavy financial burden on households due to ill health. Government s ability to achieve equity, provide public goods type of services and handle market failures is linked to the quantum and composition of health sector expenditure. In thinking about new strategies to address health policy goals, it is therefore crucial to know where funds for health care by the government are coming from and how they are being utilized. This paper contributes to the development of the Medium Term Expenditure Framework for the Government of Andhra Pradesh by assessing the sources and uses of funds for provision of health care by the Department of, Medical and Family Welfare (DoHMFW) and other government agencies. The remainder of the paper undertakes the following main tasks. Section II outlines the conceptual framework and methods used for health expenditure analysis. Section III examines the main trends in aggregate spending by the DoHMFW and its distribution. The section also provides a preliminary discussion of the way DOHMFW spending has been financed in recent years. Section IV 3 IHSG (2003). A medium term strategy and expenditure framework for health in Andhra Pradesh. Report submitted to DoHMFW, GoAP and DfID, India by International Systems Group, Harvard School of Public, Boston, 2003. 2

analyzes the sources and uses of funds by other health care agencies of the State government. II. Conceptual Framework for Expenditure Analysis A Defining Expenditure The World Organization (WHO) makes a distinction between health services and health related services 4. services mainly consist of public health services, hospital services, education and training for health services and alternate systems of medicine. related services include education, water supply, sewerage and sanitation, housing for poor, community development, nutritional and other welfare programmes which could have a bearing on health status. expenditure has been defined to include expenditure on health services as well as the health related services. 5 However in health accounting, only expenditure on activities whose primary purpose is improving health are included in total estimates of health spending 6. Therefore expenditure on health related services which have multiple objectives, are excluded from our analysis. Hence nutritional and other welfare programmes which could have a bearing on health status, but are primarily anti poverty measures, are excluded from the analysis. However, we have included expenditure on ICDS programme, as the primary objective of the programme is promotion of health of mothers and children. While education is a health related service and hence not included within the health accounts boundary, expenditure on medical education and training is considered as health expenditure. For the purpose of the study we have defined health expenditure as all expenditures for activities whose primary purpose is health improvement for the State during a period of one year (April to March). expenditure includes spending on primary care, secondary care, tertiary care, administration of health services and programmes, medical education, training and research and capital investment for health purpose. B National Accounts Framework We use a National health accounts (NHA) framework for Expenditure Analysis. NHA is an internationally accepted tool for summarizing, describing and analyzing health care financing and expenditure within a particular health system. expenditure 4 World Organization, Development of indicators for monitoring progress towards health for all by the year 2000, Geneva, 1981 5 Mahapatra Prasanta. Government expenditure on health in Andhra Pradesh since the eighties: Has it been appropriate? IHS Working Paper 09/1994, Institute of Systems, Hyderabad, 1994 6 World Organization. Guide to producing national health accounts- with special applications for low income and middle income countries, 2003, Geneva 3

consists of financial outlays that service the health system. NHA trace the flow of resources invested and consumed in the production of health and answers questions such as: Who in the country pays for health care? How much do they spend and on what types of services? Who manages and organizes funds for health care? Who are the recipients of health care funds? How are funds distributed across different health services? Who benefits from health expenditures? The NHA framework adopts its basic principles of health accounting from the System of Accounts (SHA) of the Organization for Economic Cooperation and Development (OECD). The SHA provides the International Classification for Accounts (ICHA), which classifies health care entities and categorizes each type of health expenditure. Based on health policy requirements and form in which data available in the country, the classification of health accounts have been modified by the Government of India 7. The National Accounts framework identifies four principal entities within a health system: 1. Financing Sources Sources refer to the entities from which financial resources are generated for health. spending by sources answer the question who pays for health care? In the Andhra Pradesh context, sources include: governments (state, central and local), quasi government organizations, public sector enterprises, private sector enterprises, NGOs, households and external assistance. 2. Financing Agents Financing Agents are institutions or entities that channel funds provided by financing sources and use the funds to pay for, or purchase, the activities inside the health accounts boundary. Examples are State and Central Ministries for, local governments, households, NGOs, social and private insurance, private and public enterprises etc. This category sheds light on the question "who manages and organizes funds for health care?" 3. Providers of Care They are the end users or final recipients of health care funds. They are the entities which deliver health services. They include hospitals and dispensaries under MoHFW, SDH local bodies, social insurance, quasi government bodies, private sector and NGOs; private doctors; traditional care providers; Trained Birth Attendants; drug outlets; diagnostic centers; 7 National Accounts India 2001-02, Ministry of and Family Welfare, Government of India, 2006 4

medical education and training institutions; research and development institutions; providers of collective health services such as public health and RCH programs; general health administrators and health insurance administration. This category provides information on the question "To whom does the money go?" 4. Functions of Care Functions refer to the services or activities that providers deliver with their funds. Information at this level answers the question" what type of service product or activity was actually produced? Functions include: primary care, secondary care, tertiary care, disease control programmes, RCH programmes, health administration, medical education, training and research and capital formation. C Materials and Methods Government Expenditure includes that on: 1. Department of, Medical and Family Welfare (DoHMFW) and In Kind transfer of materials and supplies from MoHFW 2. Other line departments of the state government such as the Labour, Women and Child Welfare and Tribal Welfare. 3. Government organized Societies for disease control and family welfare 4. Provision/Reimbursements for health care of its employees In the current analysis we focus on expenditure by departments and societies. Data for analysis is from budget documents of respective departments and income and expenditure statements of respective societies. Data was analyzed up to detailed head level of the budgets of departments using National Accounts framework adopted by the Government of India 8 to understand trends in public health spending. Analysis of health expenditure of GoAP departments includes (a) entire expenditure of DoHMFW (b) expenditure on ESIS by Department of Labor (c) expenditure on Tribal Services by Department of Tribal Welfare, and (d) expenditure on ICDS by Department of Women Welfare and Child Welfare. Expenditure of these departments are included in the Social Services Sector. The corresponding sub-sectors and major heads under which expenditure is recorded is given in Table-1 8 National Accounts India 2001-02, Ministry of and Family Welfare, Government of India, 2006 5

Table 1: Classification of Expenditure in Budget Sub-Sector Department HoD Major Heads and Family Welfare DoHMFW Non 2059 Public Works HMFW 2210 2210 2059 2251 Medical 2210 4210 2059 2210 Education 6210 4210 6210 2210 2225 3454 4210 2059 2210 2211 2225 3454 4210 FW 2211 4211 IPM 2210 2210 2210 Medical and Public Heath 2211 Family Welfare 2225 Welfare of SCs & STs 2235 Social Security and Welfare 2251 Secretariat Social Services 3435 Ecology and Environment 3454 Census Surveys & Statistics 4210 Capital Outlay on Medical and PH 4211 Capital Outlay on Family Welfare 6210 Loans for Medical and PH Labour and Labour Welfare Welfare of SC, ST and BC s Social Welfare and Nutrition Department of Labour Department of Tribal Welfare Department of Women, Child and Disabled Welfare AYUSH 2059 2210 2210 DCA 2059 2210 2210 Insurance 2210 2210 Medical Services Tribal Welfare 2225 2225 Women Development and Child Welfare 2235 III. Analysis of Department of, Medical and Family Welfare (DoHMFW) Expenditure 1. Total DoHMFW Spending Annex- 1 provides details of overall health care spending by DOHMFW during the thirty- year period from 1975-76 to 2005-06. For the year 2005-06, the expenditure figures are based on actual expenditure estimated by the Department of Finance. For all other years, figures are based on actual expenditure reported in the Demand for Grants of the Government of Andhra Pradesh. The data indicate that overall DOHFW spending has been increasing over time both in terms of current prices and constant prices. The general trend of an increase has held consistent throughout the period, except for a dip in the early 1990s and more recently in 2002-03 (Figure-3). 6

Figure 3: Trends in DoHMFW spending in Current and Constant Prices (1975-2006) 1800 1600 1400 1200 1000 800 600 Total Spending (Rs. Crores) Current Prices Total Spending (Rs. Crores) 1993-94 Prices 400 200 0 1975-76 1985-86 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 Aggregate and per capita real DOHMFW spending increased by 250 % and 107% respectively, over the period from 1975 to 2005. However with the exception of the period between 1995-2000, growth rate of health spending in terms of current and constant prices and per capita has been declining (Table-2). The growth rate of DoHMFW spending in the last decade was 7.94% and 4.27% in current and constant prices respectively. While the growth rate in aggregate real health spending during 1996-2000 was 8.55% in 1996-2000, the subsequent 5 year period between 2000-01 and 2005-06 recorded a growth rate of only 0.89%. The growth rate in aggregate real health spending during the latter period is lower than the rate of population increase in the state. As a result this period had a negative growth rate of -0.28% in real per capita health spending. Table-2: Growth Rates of DoHMFW Expenditure Growth Rate 1996-2000 2001-2005 1996-2005 Total Expenditure (Current Prices) 14.49 4.65 7.94 Total Expenditure (1993-94 Prices) 8.55 0.89 4.27 Total Expenditure Per Capita (1993-94 Prices) 6.87-0.28 3.2 Non Expenditure 14.59 7.7 9.45 Expenditure 14.31-0.88 5.34 Figure-4 indicate that DOHMFW health expenditures, whether taken as a proportion of total state domestic product (GSDP), or total government spending have been steadily declining. From about 1% of the GSDP or 4% of total government spending in 1997-98, DoHMFW spending has declined to 0.71% of the GSDP or 3.32% of the total government spending in 2005-06. This suggests that health has not been accorded any much priority in 7

terms of amounts allocated to it, relative to other activities of the government. Figure-4: DoHMFW Spending as % of GSDP and Total Public Expenditure (1975-2005) 7.00 6.00 5.00 4.00 3.00 2.00 Spending/GDP(%) Spending /Total Public Expenditures (%) 1.00 0.00 1975-76 1985-86 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2. and Non- Expenditure The Budget is organized in terms of and Non Expenditure. Non-plan expenditure reflects expenditure of the government on maintaining the current level of services. In other words, it reflects the administrative expenses of the government. On the other hand, plan expenditure of the government refers to the expenses incurred by the government towards the projects that are planned as part of the Five-Year s of the state. Table-3 present details on the composition of DOHMFW expenditure since 1990. In the first half of the 1990s Non-plan expenditures accounted for around 70 percent of all spending by DOHFW. In the latter half of the 1990s Non spending declined to around 60% of the DoHMFW expenditure. This decline was mostly on account of increases in expenditures on plan activities supported by the World Bank under the APFRP and the APERP projects. With these projects completed share of Non expenditure has been around 65-68% in the recent years. In the last decade the growth rate of Non and Expenditure was 9.45% and 5.34% respectively. While the growth rate in non plan and plan expenditure during 1996-2000 was 14.59% and 14.31% respectively in 1996-2000, the corresponding growth rates in the subsequent 5 year period between 2000-01 and 2005-06 was 7.7% and -0.88%. The high rate of growth in plan expenditure during the first half of the decade was primarily on account of the different externally aided projects. The negative growth in the latter half of the past decade is attributable to completion of these projects and a decline in central funding. 8

Table-3: Trends in Non and Expenditure of DoHMFW (1990-2005) Year DoHFW Expenditure (Rs. Crores) % Share in Total Expenditure Non Total Non 1990-91 95 236 331 28.68 71.32 1995-96 182 423 605 30.08 69.92 1996-97 280 490 770 36.39 63.61 1997-98 331 519 850 38.97 61.03 1998-99 465 574 1,039 44.76 55.24 1999-00 459 706 1,165 39.44 60.56 2000-01 464 830 1,294 35.88 64.12 2001-02 526 814 1,340 39.25 60.75 2002-03 478 858 1336 35.78 64.22 2003-04 506 946 1,452 34.85 65.15 2004-05 490 1002 1492 32.84 67.16 2005-06 497 1095 1592 31.22 68.78 3. Expenditure by Resource Categories Table-4 provides distribution of DoHMFW by major expenditure accounts. In recent years relative share of debt repayments has increased to about 4% of the total expenditure. Share of Capital expenditure has varied between 5% and 0.35% of the total expenditure. Table-4: Share of Major Expenditure Accounts in DoHMFW Expenditure DoHMFW Expenditure (Rs. Cr) % Share Year Revenue Capital Loans Total Revenue Capital Loans 1998-99 1037.68 1.32 1,039 99.87 0.13 1999-00 1104.75 60.25 1,165 94.83 5.17 2001-02 1246.06 47.94 1,294 96.30 3.70 2001-02 1287.15 53.31 1,340 96.06 3.98 2002-03 1302.94 33.47 1336 97.53 2.51 2003-04 1420.77 8.23 23 1,452 97.85 0.57 1.58 2004-05 1428.79 15.21 48 1492 95.76 1.02 3.22 2005-06 1520.47 5.49 65 1592 95.5 0.35 4.08 Annex-2 presents information about the composition of revenue expenditures, both plan and non-plan, by major resource categories. The data indicate that wage and salary expenditures constitute a substantial chunk of DOHMFW spending, in excess of 60 percent for 2003-4, and even higher in earlier years. Wage and salary component includes expenditure on pay, allowances, wages and salary grants. It is possible that a part of the expenditures under the grants category may also constitute wage and salary expenses so that the actual proportion going to establishment charges may be even higher than indicated in the Annex-2. Wages and salaries has declined in the last few years, from a high of 72 percent of revenue expenditure in 1996-96, to current levels of about 65%. One reason for this tendency could 9

be the freeze in recruitment in recent years as a result of which number of posts are lying vacant. Drugs and the expenditure head materials and supplies constitute a second major source of spending. The share of drugs and materials and supplies has declined from around about 20% percent of DOHFW spending in 1975 to about 7.4% in 1999-2000. In recent years spending on this account has marginally increased to about 10% of the total health spending. The share of drugs alone is only about 6% of the total spending data possibly indicating a problem area in so far as drug availability and hence of quality of care at public facilities is concerned. A third area of major expenditures is operations and administration accounting for roughly one-fifth of all DOHMFW spending. Expenditures in this category include other grants in aid, as well as expenses associated with office travel, miscellaneous office expenses, rent payment, fuel and publications, and contractual expenses. Increases in its share since the mid-1990s are due partly to increases under the head other grants in aid funded by external support under APFRHSP and APERP. In more recent years the increase in its share has been mainly due to greater reliance on contractual manpower due to a freeze in government recruitment. In addition to the above, small portions of D0HMFW spending are allocated for stipend and scholarship support (between 1-2 percent) and maintenance and minor works relating to buildings and equipment. Sub component wise details of expenditure under each resource category for the last four years are provided in Annex 3.1-3.4 Table-5 provides details of resource category wise composition of plan and non plan expenditure in recent years. Between two thirds and three fourths of the non plan expenditure has been on wages and salary. Given that these are establishment charges are which are potentially committed expenditures, there is very little flexibility for changes in allocation of DoHMFW spending. On the other hand wages and salary component accounts for 40-50% of the spending suggesting a greater degree of flexibility in planning for changes in allocation of DOHMFW spending, relative to non-plan spending. However this may not be readily feasible as about 70 percent of all plan expenditures, is on specific programmes supported by external funding and centrally sponsored schemes of the Government of India. The Department is further constrained since about 4.5% of its funds are earmarked for loan repayments (2005-06) 10

Table-5: Resource cost wise composition of plan and non plan expenditure (2002-2005) Year Salaries Stipend Operations Material Maintenance Capital Loans and Wages & Admin & Supplies & Minor Works 2002-03 Non 73.94 0.19 14.59 11 0.28 0 0 42.88 3.83 38.42 5.39 2.49 7.01 0 Total 62.83 1.49 23.11 8.99 1.07 2.51 0 2003-04 Non 69.56 0.16 16.58 11.09 0.18 0 2.43 50.8 2.73 34.56 8.07 2.21 1.63 0 Total 63.02 1.05 22.85 10.04 0.89 0.57 1.58 2004-05 Non 66.56 0.25 14.46 10.34 3.60 0.00 4.79 52.23 4.38 26.35 10.02 3.92 3.10 0.00 Total 61.85 1.61 18.36 10.24 3.70 1.02 3.22 2005-06 Non 70.63 0.20 12.66 9.50 2.97 0.00 4.04 47.45 4.88 31.01 9.55 0.61 1.1 5.2 Total 62.96 1.75 19.01 9.52 2.19 0.35 4.08 4. Expenditure by Functions of Care Heads of Department wise expenditure on functions for the years 2002-03 to 2004-06 is provided in Annex 4.1-4.4. Expenditure has been disaggregated in terms of core functional areas such as provision of primary, secondary and tertiary care services; medical education, training and research; capital formation; debt repayment, quality control of food, water and drugs; and manufacture of drugs and vaccines. While expenditure on direction and administration on health programmes, training and capital formation are normally taken separately in the health accounts framework, from a policy perspective these are expenditures incurred for provision of services. Similarly expenditure on quality control of food, water and drugs and manufacture of vaccines are that on primary preventive services. Accordingly these expenditures have been included in respective services and expenditure on various functions estimated for the last two years (Table-6). Expenditure on different functions has been estimated on the basis of allocation to sub heads. 11

Details of sub heads included under each function is provided in Annex 6.1 and 6.2 Table 6: DoHMFW Expenditure by Functions of Care (2004-03 & 2005-06) Expenditure (Rs lakh) % Share Functions 2004-05 2005-06 2004-05 2005-06 General Direction and Administration 166.42 229.12 0.25 0.30 Primary Care 86459.21 87475.054 57.91 54.94 Secondary Care 21263 22747.847 14.24 14.29 Tertiary Care 22485.84 27121.76 15.06 17.03 Medical Education and Research 14117.48 15158.73 9.32 9.37 Repayment of Loans 4800 6500 3.22 4.08 Total 149292 159232.51 100.00 100.00 Primary Care as % of GSDP 0.43% 0.39% Expenditure on primary care includes that on provision of services through PHCs, sub centers, maternal and child health centers, AYUSH dispensaries, Department of dispensaries and societies. It also includes expenditure on disease control programmes, family welfare programmes, quality control of water, food and drugs, manufacture of vaccines and sera. Between 55-58% of the health expenditure is on provision of primary care services. It is seen that expenditure on primary care was about 0.43% and 0.39% of the GSDP in 2004-05 and 2005-06 respectively. Secondary care expenditure includes that on provision of services through APVVP hospitals, secondary care institutions of the Department of, AYUSH medical colleges and nonprofit hospitals providing secondary level eye care. About 14% of the DoHMFW expenditure is on provision of secondary care services. About 15% and 17% of the respective expenditure for the last two years was on provision of tertiary care services. About 2% of the total DoHMFW budget is spent on providing assistance to autonomous tertiary care institutions like NIMS, SVIMS, MNJ Institute of Oncology etc., assistance for free treatment at these institutions and assistance for care of children with heart problems. The remainder is spent on provision of tertiary care services through intuitions under the DME. About 22% of the DoHMFW budget is normally allocated for DME. However only about 15% to 17% is spent on provision of treatment while the rest of the spending is on repayment of loans, education and related expenses. About 9% of the DoHMFW expenditure is on medical education and research. This includes expenditure of the Directorate of Medical Education, NTR University of Sciences, State Institute of and Family Welfare, provision of education through medical, AYUSH, nursing and paramedical colleges, and research schemes. Though the Department spends about 8% on Direction and Administration, much of 12

the expenditure is related to provision of specific services and have been included under expenditure on respective services. General Direction and Administration includes expenditure that cannot be assigned to a particular service such as expenditure of the Secretariat, compilation of vital statistics and health insurance. In the last two years the expenditure on this account amounted to 0.25% and 0.3 % of the budget respectively. In recent years repayment of loans account for 3-4% of the DoHMFW budget. 5. Expenditure by Providers Annex 5.1-5.4 provides details expenditure by Providers of Care in recent years. Expenditure on different providers has been estimated on the basis of allocation to sub heads. Details of sub heads included under each provider is provided in Annex 6.1 and 6.2. Primary Care providers such as subcentres, PHCs, DoH hospitals and dispensaries, family welfare centres/mch centres, OSM dispensaries, societies and hospitals and providers of collective services account for about 55% of the budget. Collective health services are expenditure on disease control programs and family welfare services provided through these institutions for which provider wise break up is not available Secondary Care providers include APVVP hospitals and larger DoH hospitals and they account for 12 to 14 % of the budget. Tertiary Care providers include teaching hospitals in allopathy and OSM and autonomous tertiary hospitals like NIMS, SVIMS etc. They account for about 20% of the budget. This includes expenditure on both treatment and education. Other training and education institutions account for about 1% of the budget. Expenditure on Government Administrators include that on Secretariat and State and district headquarters of sub-departments. They account for about 8% of the budget. 6. Expenditure by Sources of Fund Table 7 provides details of contribution of various sources to DoHMFW expenditure in recent years. GoAP contribution currently accounts for about 84% of DoHMFW funds. Relative contribution of GoAP has been increasing in recent years due to completion of major external aided projects and decline in central government funding. External aid which accounted for about 12 % of the budget in 2001-02 currently accounts for about 0.53% of the total budget. Government of India contribution is provided under the centrally sponsored programs, finance commission grants and PMGY. GOI contributions have declined as a proportion of the budget from 17.38% in 2001-02 to about 11% at present. 13

Table 7: DoHMFW Expenditure by Sources of Funds Expenditure (Rs Crore) % Share Year GoAP GoI External Total GoAP GoI External 2001-02 984.33 242.63 168.8 1395.76 70.52 17.38 12.09 2002-03 1009.8 246.06 80.14 1336 75.58 18.42 6 2003-04 1189.01 169.44 95.55 1454 81.77 11.65 6.57 2004-05 1256.95 202.43 33.54 1492.92 84.19 13.56 2.25 2005-06 1407.19 176.63 8.51 1592.33 88.37 11.09 0.53 7. DoHMFW Expenditure at the District Level There are twenty-three districts in Andhra Pradesh, and there is substantial variation across districts in economic and human development achievement. Annex 7.1 provides information on select key socioeconomic and demographic in Andhra Pradesh districts and highlights the inter-district differences. There is substantial inter-district variation especially with regard to income per capita, the proportion of rural population living below the poverty line and indicators of human development achievement, such infant and child mortality and the adult literacy rate. Generally there appears to be good correlation between economic achievement and indicators of health and education across districts. Annex 7.2-7.5 describe, for selected years, the allocation of health expenditures (by district) for major sub-departments under DOHMFW the Directorate of, Family Welfare, Directorate of Medical Education (DME), and APVVP. Expenditures on the first two comprise the bulk of spending on primary health care. It is also seen that that primary health and family welfare expenditures per capita are positively correlated with higher infant mortality districts (Figure-5) and inversely correlated with income per capita (Figure-6), which is along the desired lines in that allocations are associated with need. While it is reasonable to assume that the district wise allocation is more or less in accordance with local requirements, data from facility surveys commissioned by the GOI indicate that there are significant differences between districts when it comes to facilities at the sub centre and PHC level. The first survey was conducted in 12 districts in 1999-2000 and covered PHCs in the district. The second survey was conducted in 11 districts 9 in 2002-03 and in addition covered sub centers. The first survey indicated that there was huge gaps in infrastructure, personnel and supplies in the selected districts. The second survey done after three years indicate a much healthier situation in the selected districts mostly on account of 9 The districts include: Vizianagaram, Mahboobnagar, Khamam, RangaReddy, Prakasam, East Godavari, Nellore, Adilabad, Chittoor, West Godavari and Srikakulam 14

investments under APERP which has substantially improved primary care infrastructure throughout the state. However significant gaps in infrastructure, personnel and facilities, continue to remain. Figure-5: District Spending Patterns 2000-01: Primary Spending and IMR Per Capita Priimary and Family Welfare Spending (Rs.) 120.0 100.0 80.0 60.0 40.0 20.0 0.0 0 20 40 60 80 100 120 Infant Mortality Rate (per 1,000 Live Births) Source: Mahal Ajay, Narayana K.V, Rao Sampath. Expenditures and Financing of Department of and Family Welfare in Andhra Pradesh: Towards a Resource Envelope in the Period 2003-07. 2003 Figure-6 District Spending Patterns 2000-01:Primary Spending and Income Per Capita Per Capita Primary and Family Welfare Spending (Rs.) 120.0 100.0 80.0 60.0 40.0 20.0 0.0 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 Per Capita District Domestic Product (Rs.) Source: Mahal Ajay, Narayana K.V, Rao Sampath. Expenditures and Financing of Department of and Family Welfare in Andhra Pradesh: Towards a Resource Envelope in the Period 2003-07, 2003 IV. Expenditure of Other Government Departments and Societies A. Expenditure by Societies These are expenditures that would ordinarily be classified as being under DOHMFW auspices, were it not for the fact that the funds supporting such expenditures are directly provided to the concerned directorates and state- and district-level functionaries in a form that 15

leads to their being excluded in the accounting under the Demand for Grants. They include expenditures by societies such as the Andhra Pradesh State AIDS Control Society (APSACS) and the State Society for and Family Welfare. Similar societies exist for tuberculosis, leprosy, malaria and blindness. Because of the way these non-profit organizations are registered, most funds received by them are not recorded under the demand for grants. Indeed the purpose of these societies appears primarily to serve as a conduit for an easy transfer of new funds directly to entities related to vertical programs. The societies are primary funded by external aid and GOI. Share of GoAP has been usually minimal. In 2004-05, these societies together had an expenditure of about 92 crores. However, the relative share of Societies in State health expenditure will significantly increase in the next five years on account of the scaling up of RCH and NACP programmes. The RCH-II has already committed about Rs. 800 crores to AP for the next five years. Table 8: Expenditure of Societies (2002-2005) Year Amount (Rs. Lakhs) 2002-03 5076.33 2003-04 7116.49 2004-05 9236.65 B. Expenditure by Other Line Departments expenditure by other line departments include (a) expenditure on Insurance Medical Services by Department of Labor (b) expenditure on Tribal Services by Department of Tribal Welfare, and (c) expenditure on Integrated Child Development Services (ICDS) by Department of Women Welfare and Child Welfare. While expenditure on Insurance Medical Services is considered as secondary care expenditure, expenditure on Tribal Services and ICDS is considered as primary health care expenditure. Table-9: Expenditure by other GoAP departments Primary Care 2004-05 2005-06 (RE) 2006-07 (BE) Department of Tribal Welfare 3537 4702 5058 Department of Women, Child and Disabled Welfare 1662153 2504903 2473844 Total (Primary Care) 1665690 2509605 2478902 Secondary Care Department of Labour (Insurance Medical Services) 633410 554219 589973 Total (Other Departments) (Rs thousands) 2299100 3063824 3068875 In 2005-06, these departments had a health expenditure of about 306 crore Rupees. Of this about 250 crore Rupees was spent on primary health care and 55 crore Rupees on secondary health care (Table-9) 16

V. Total Expenditure by GoAP Departments and Societies Total health expenditure of GoAP departments and societies was about Rs.2013 crore rupees in 2005-06. Inclusion of societies and other departments increases the relative share of primary care expenditure of State government agencies from about 55% to around 62% of the total health expenditure. Total primary care expenditure is about 0.56% and 0.54% of the GSDP in 2004-05 and 2005-06 respectively. Table-10:Total Expenditure by GoAP Departments and Societies by Functions (2005-06) Function DoHMFW & Societies Other Total DoHMFW Societies Total Departments Direction & Administration 2.29 2.29 2.29 Primary Care 874.75 85.36 960.11 250.96 1211.07 Secondary Care 227.48 227.48 55.42 282.90 Tertiary Care 271.22 271.22 271.22 Training & Research 151.59 151.59 151.59 Repayment of Loans 65.00 65.00 65.00 Total (Rs. Crores) 1592.33 85.36 1677.69 306.38 1984.07 % Share Direction & Administration 0.14 0.14 0.12 Primary Care 54.94 100.00 57.23 81.91 61.04 Secondary Care 14.29 13.56 18.09 14.26 Tertiary Care 17.03 16.17 13.67 Training & Research 9.52 9.04 7.64 Repayment of Loans 4.08 3.87 3.28 Total 100.00 100.00 100.00 100.00 100.00 The total health expenditure of GoAP departments and societies for the year 2005-06, by sources of funds is provided in Table-11. The share of GoAP in expenditure of health departments in 2005-06 was about 88.39%. Its relative share declines to about 84% when expenditure of societies are taken into accounts. GoAP share further declines to about 73.74% when we consider the total health expenditure of its health care agencies. This is mainly on account of greater contribution of GoI funds in the expenditure of Societies and other line departments. In 2005-06, share of GoI in expenditure of health departments was around 11%. This increases to about 23.6% when we take into account the total health expenditure of all the GoAP health care agencies. The contribution of external aid to the total health expenditure of GoMP agencies was about 2.7% in 2005-06. The actual share of external sources will be higher, given that GoI funding to RCH and AIDS Control Societies is financed through an external aid component. 17

Table-11:Total Expenditure by GoAP Departments and Societies by Sources of Funds (2005-06) DoHMW and its Societies Other Sources DoHMFW Societies Total Departments Total HE GoAP 1407.19 1407.19 55.89 1463.08 GoI 176.63 85.36 261.99 206.19 468.18 External Aid 8.51 8.51 44.30 52.81 Total (Rs. Crores) 1592.33 85.36 1677.69 306.38 1984.07 % Share GoAP 88.37 83.88 18.24 73.74 GoI 11.09 100.00 15.62 67.30 23.60 External Aid 0.53 0.51 14.46 2.66 Total 100.00 100.00 100.00 100.00 100.00 18

Annex:-1 Trends in DoHMFW Spending 1975-2005 Year Total Spending (Rs. Crores) Current Prices Total Spending (Rs. Crores) 1993-94 Prices Spending per Capita (Rs.) 1993-94 Prices Spending/GDP (Percent) Spending /Total Public Expenditures (Percent) 1975-76 41.00 243.00 51.56 0.96 6.00 1980-81 90.00 357.00 67.28 1.23 6.40 1985-86 189.00 506.00 84.79 1.41 6.00 1990-91 331.00 494.00 74.25 1.06 5.03 1995-96 605.00 490.41 68.84 0.84 3.87 1996-97 770.00 587.74 81.36 0.94 4.27 1997-98 850.00 602.26 82.02 0.99 4.04 1998-99 1039.00 688.07 92.17 1.00 3.90 1999-00 1165.00 740.52 98.45 0.93 3.83 2000-01 1294.00 798.95 103.53 0.92 3.42 2001-02 1395.00 835.41 109.62 0.92 3.26 2002-03 1384.00 797.76 103.40 0.85 3.59 2003-04 1510.92 840.64 107.67 0.82 3.09 2004-05 1541.92 831.13 105.24 0.76 3.37 2005-06 1645.82 855.61 107.15 0.73 3.32 Source: GoAP Budget Documents. GSDP from Economic Survey of Andhra Pradesh and Population projections from Registrar General of India Note: The figures include expenditure on ESIS, though they have been transferred from the DoHMFW to Department of Labour in 2001-02, to provide comparability with earlier years. 19

Annex-2: Share of Different Resource Categories in DoHFW Revenue expenditure (1975-2005) Year Wages and Salaries (%) Drugs Medical Supplies (%) Stipend & Scholar-ships (%) Maintenance & Minor Works (%) Operations (%) 1975-76 62.09 19.33 1.78 0 16.8 1980-81 61.71 16.58 2.25 0.64 18.83 1985-86 61.29 18.01 1.33 0.2 19.17 1990-91 68.41 12.31 1.61 0.1 17.57 1995-96 72.29 12.02 1.22 0.31 14.15 1996-97 64.46 13.87 1.2 0.84 19.63 1997-98 64.56 12.12 0.85 0.66 21.81 1998-99 59 11.43 0.87 2.97 25.73 1999-00 69.21 7.38 0.94 2.4 20.08 2000-01 66.28 10 1.01 1.05 21.66 2001-02 66.57 9.61 1 1.57 21.24 2002-03 64.45 9.22 1.10 1.53 23.70 2003-04 64.40 10.26 0.91 1.07 23.35 2004-05 2005-06 64.59 10.69 1.68 3.87 19.17 65.98 9.98 1.83 2.29 19.92 Source: Updated from Mahal Ajay, Narayana K.V, Rao Sampath. Expenditures and Financing of Department of and Family Welfare in Andhra Pradesh: Towards a Resource Envelope in the Period 2003-07. Background paper for the IHSG MTSEF for GOAP, DoHMFW Budget documents 20

Annex 3.1: DoHMFW Expenditure by Resource Costs (2002-03) Resource Costs Amount (Rs.lakhs) Share in Total (%) Non. Total Non. Total Salaries and Wages Pay 35731.05 12738.73 48469.78 41.62 26.66 36.27 Allowances 9636.75 3201.75 12838.50 11.23 6.70 9.61 DA 8552.85 3030.63 11583.48 9.96 6.34 8.67 Wages 357.66 54.49 412.15 0.42 0.11 0.31 Grant in aid to salaries 9194.71 1461.66 10656.37 10.71 3.06 7.97 Total Salary 63473.02 20487.26 83960.28 73.94 42.88 62.83 Stipend 160.32 1829.43 1989.75 0.19 3.83 1.49 Operations & Administration TA 1159.70 1462.80 2622.50 1.35 3.06 1.96 Purchases 99.62 3622.49 3722.11 0.12 7.58 2.79 Office Expenses 3115.68 2264.13 5379.81 3.63 4.74 4.03 Rent 214.88 190.87 405.75 0.25 0.40 0.30 Professional fees 57.87 102.80 160.67 0.07 0.22 0.12 Other contractual services 21.40-25.14-3.74 0.02-0.05 0.00 Other Grant in AID 3742.88 10290.50 14033.38 4.36 21.54 10.50 Petrol Oil 1071.79 243.85 1315.64 1.25 0.51 0.98 Publications 99.81 0.50 100.31 0.12 0.00 0.08 Advertising 1.64 2.25 3.89 0.00 0.00 0.00 Others 2942.13 201.71 3143.84 3.43 0.42 2.35 Total Operations & Admin 12527.40 18356.76 30884.16 14.59 38.42 23.11 Materials & Supplies Drug 5101.88 743.11 5844.99 5.94 1.56 4.37 Diet & Rations 583.54 25.36 608.90 0.68 0.05 0.46 Other materials & supplies 3758.70 1805.45 5564.15 4.38 3.78 4.16 Total Material & Supplies 9444.12 2573.92 12018.04 11.00 5.39 8.99 Minor Works & Maintenance Motor vehicles 186.49 33.12 219.61 0.22 0.07 0.16 Building and equipment 55.72 1154.50 1210.22 0.06 2.42 0.91 Total Maint & Minor Works 242.21 1187.62 1429.83 0.28 2.49 1.07 Capital 3347.46 3347.46 0.00 7.01 2.51 Loans 0.00 0.00 0.00 0.00 0.00 Total 85847.10 47782.45 133629.55 100.00 100.00 100.00 21

Annex 3.2: DoHMFW Expenditure by Resource Costs (2003-04) Resource Costs Amount (Rs.lakhs) Share in Total (%) Salaries and Wages Non. Total Non. Total Pay 34533.85 13772.95 48306.80 36.50 27.22 33.27 Allowances 9788.81 3658.58 13447.39 10.35 7.23 9.26 DA 10089.20 4025.67 14114.87 10.66 7.96 9.72 Wages 347.96 51.78 399.74 0.37 0.10 0.28 Grant in aid to salaries 11044.22 4197.49 15241.71 11.67 8.30 10.50 Total Salary 65804.04 25706.47 91510.51 69.56 50.80 63.02 Stipend 152.03 1378.95 1530.98 0.16 2.73 1.05 Operations & Administration TA 507.54 1158.97 1666.51 0.54 2.29 1.15 Purchases 190.34 4362.57 4552.91 0.20 8.62 3.14 Office Expenses 2592.39 5612.81 8205.20 2.74 11.09 5.65 Rent 152.60 191.64 344.24 0.16 0.38 0.24 Professional fees 118.11 47.02 165.13 0.12 0.09 0.11 Other contractual services 3564.14 0.17 3564.31 3.77 0.00 2.45 Other Grant in AID 3734.49 4897.66 8632.15 3.95 9.68 5.94 Petrol Oil 146.46 727.31 873.77 0.15 1.44 0.60 Publications 40.31 0.84 41.15 0.04 0.00 0.03 Advertising 3.20 21.79 24.99 0.00 0.04 0.02 Others 4638.08 465.82 5103.90 4.90 0.92 3.52 Total Operations & Admin 15687.66 17486.60 33174.26 16.58 34.56 22.85 Materials &Supplies Drug 8202.02 870.14 9072.16 8.67 1.72 6.25 Diet & Rations 621.44 65.43 686.87 0.66 0.13 0.47 Other materials & supplies 1666.96 3149.27 4816.23 1.76 6.22 3.32 Total Material & Supplies 10490.42 4084.84 14575.26 11.09 8.07 10.04 Maintenance & Minor Works Motor vehicles 99.48 376.73 476.21 0.11 0.74 0.33 Building and equipment 69.22 743.73 812.95 0.07 1.47 0.56 Total Maint & Minor Works 168.70 1120.46 1289.16 0.18 2.21 0.89 Capital 0.00 823.05 823.05 0.00 1.63 0.57 Loans 2300.00 0.00 2300.00 2.43 0.00 1.58 Total 94602.85 50600.37 145203.22 100.00 100.00 100.00 22

Annex 3.3: DoHMFW Expenditure by Resource Costs (2004-05 ) Resource Categories Resource Costs (Rs 000) Share in Total (%) Non. Total Non. Total Salaries and Wages Salaries 5533414 2144288 7677702 55.18 43.75 51.43 Wages 33770 48993 82763 0.34 1.00 0.55 Grant in aid to salaries 1107273 366440 1473713 11.04 7.48 9.87 Total Salary 6674457 2559721 9234178 66.56 52.23 61.85 Scholarships and Stipend 25537 214612 240149 0.25 4.38 1.61 Operations & Administration Office Expenses 239174 192762 431936 2.39 3.93 2.89 Rents Rates and Taxes 12102 29239 41341 0.12 0.60 0.28 Travel Allowance 84443 143010 227453 0.84 2.92 1.52 Publications 4314 367 4681 0.04 0.01 0.03 Other Administrative Expenses 1719 497 2216 0.02 0.01 0.01 Petrol, Oil and Lubricants 10420 38981 49401 0.10 0.80 0.33 Advertisements 3434 1897 5331 0.03 0.04 0.04 Professional Services 500184 4635 504819 4.99 0.09 3.38 Other Contractual Services 0 4726 4726 0.00 0.10 0.03 Other Grant in AID 538228 467891 1006119 5.37 9.55 6.74 Other Charges 56062 401655 457717 0.56 8.20 3.07 Inter Account Transfers 0 5557 5557 0.00 0.11 0.04 Total O&A 1450080 1291217 2741297 14.46 26.35 18.36 Materials &Supplies Materials and Supplies 110979 356508 467487 1.11 7.27 3.13 Drugs and Medicines 830695 130322 961017 8.28 2.66 6.44 Cost of Ration/Diet Charges 62967 2580 65547 0.63 0.05 0.44 Clothing, Tentage and Store 32592 1856 34448 0.33 0.04 0.23 Total M&S 1037233 491266 1528499 10.34 10.02 10.24 Maintenance & Minor Works Minor Works 351948 31975 383923 3.51 0.65 2.57 Motor Vehicle 8407 5032 13439 0.08 0.10 0.09 Machinery and Equipment 447 155187 155634 0.00 3.17 1.04 Total Maintenance 360802 192194 552996 3.60 3.92 3.70 Major Works 0 152076 152076 0.00 3.10 1.02 Repayment of Loans 480000 0 480000 4.79 3.22 Grand Total 10028109 4901086 14929195 100 100 100 23

Annex 3.4: DoHMFW Expenditure by Resource Costs (2005-06 RE) Resource Categories Resource Costs (Rs 000) Share in Total (%) Non. Total Non. Total Salaries and Wages Salaries 6941791 2428687 9370478 41.32 58.40 52.75 Wages 36228 8974 45202 0.15 0.30 0.25 Grant in aid to salaries 1417638 351218 1768856 5.98 11.93 9.96 Total Salary 8395657 2788879 11184536 47.45 70.63 62.96 Scholarships and Stipend 23410 286942 310352 4.88 0.20 1.75 Operations & Administration Office Expenses 336479 191067 527546 3.25 2.83 2.97 Rents Rates and Taxes 14915 36159 51074 0.62 0.13 0.29 Travel Allowance 65760 187568 253328 3.19 0.55 1.43 Publications 4581 230 4811 0.00 0.04 0.03 Other Administrative Expenses 1812 100 1912 0.00 0.02 0.01 Petrol, Oil and Lubricants 12374 35514 47888 0.60 0.10 0.27 Advertisements 6440 12210 18650 0.21 0.05 0.10 Professional Services 511255 4615 515870 0.08 4.30 2.90 Other Contractual Services 0 272404 272404 4.63 0.00 1.53 Other Grant in AID 484252 571459 1055711 9.72 4.07 5.94 Other Charges 66785 560087 626872 9.53 0.56 3.53 Inter Account Transfers 0 0 0 0.00 0.00 0.00 Total O&A 1504653 1871413 3376066 31.84 12.66 19.01 Materials &Supplies Materials and Supplies 109679 413933 523612 7.04 0.92 2.95 Drugs and Medicines 904512 144148 1048660 2.45 7.61 5.90 Cost of Ration/Diet Charges 82932 2100 85032 0.04 0.70 0.48 Clothing, Tentage and Store 32587 1258 33845 0.02 0.27 0.19 Total M&S 1129710 561439 1691149 9.55 9.50 9.52 Maintenance & Minor Works Minor Works 332952 3055 336007 0.05 2.80 1.89 Motor Vehicle 8461 9270 17731 0.16 0.07 0.10 Machinery and Equipment 11225 23402 34627 0.40 0.09 0.19 Total Maintenance 352638 35727 388365 0.61 2.97 2.19 Major Works 3000 3000 0.05 0.00 0.02 Repayment of Loans 480000 330000 810000 5.61 4.04 4.56 Grand Total 11886068 5877400 17763468 100.00 100.00 100.00 24

Annex-4.1: DoHFW Expenditure by Functions of Care (2002-03) Functions of Care Heads of Department Total (Rs. DHFW DME DoH IPM OSM DCA FW Thousand) Services % Share Primary Care Services 2637214 399452 3036666 22.72 Disease Control 1939602 0 1939602 14.51 Family Welfare 107120 0 2023749 2130869 15.95 Total Primary Care 4683936 399452 2023749 7107137 53.19 Secondary 1726153 1759 1727912 12.93 Tertiary 127915 1642918 1770833 13.25 Total Services 1854068 1642918 4683936 401211 2023749 10605882 79.37 Education and Research 37085 953899 32363 108021 76107 1207475 9.04 Direction & Administration 77139 93422 510513 27320 327348 1035742 7.75 Manufacture of Drugs, Vaccines 113370 22638 41144 177152 1.33 Drug, Food and Water Quality 1429 514 1943 0.01 Capital Expenditure 57500 277246 334746 2.51 Loans 0 0.00 Total 1968292 2747739 5504058 114799 559190 41658 2427204 13362940 100.00 % Share 14.41 20.11 40.28 0.84 4.09 0.30 17.76 100.00 25

Annex-4.2: DoHFW Expenditure by Functions of Care (2003-04) Functions of Care Heads of Department Total (Rs. DHFW DME DoH IPM OSM DCA FW Thousand) Services % Share Primary Care Services 3480173 419932 3900105 26.86 Disease Control 1764053 1764053 12.15 Family Welfare 93155 2345499 2438654 16.79 Total Primary Care 8102812 55.80 Secondary 1624943 124970 1749913 12.05 Tertiary 143570 1723023 1866593 12.86 Total Services 11719318 80.71 Education and Research 41425 936358 37599 121923 78367 1215672 8.37 Direction & Administration 89204 122730 618267 27603 234883 1092687 7.53 Manufacture of Drugs, Vaccines, 106675 25340 132015 0.91 Drug, Food and Water Quality 378 47941 48319 0.33 Capital Expenditure 82305 82305 0.57 Loans 230000 230000 1.58 Total (Rs thousand) 1899142 3012111 6200522 107053 594798 47941 2658749 14520316 100.00 % Share 13.08 20.74 42.70 0.74 4.10 0.33 18.31 100.00 26

Annex-4.3: DoHFW Expenditure by Functions of Care (2004-05 RE) Functions of Care Heads of Department Total (Rs. DHFW DME DoH IPM OSM DCA FW Thousand) % Share Services Primary Care Services 3667135 429104 4096239 24.40 Disease Control 2148947 2148947 12.80 Family Welfare 172756 3199139 3371895 20.08 Total Primary Care 5988838 429104 3199139 9617081 57.28 Secondary 1692366 44403 1736769 10.34 Tertiary 159959 1843151 2003110 11.93 Total Services 13356960 79.55 Capital Expenditure 109740 2000 111740 0.67 Direction & Administration 86661 210716 625642 28880 489798 1441697 8.59 Education and Research 44688 868228 39448 124468 114026 1190858 7.09 Manufacture of Drugs, Vaccines 114174 32452 146626 0.87 Drug, Food and Water Quality 600 61220 61820 0.37 Loans 480000 480000 2.86 Total (Rs thousand) 1983674 3402095 6808071 114774 614904 61220 3804963 16789701 100 % Share 11.81 20.26 40.55 0.68 3.66 0.36 22.66 100.00 27

Annex-4.4: DoHFW Expenditure by Functions of Care (2005-06 BE) Functions of Care Heads of Department Total (Rs. DHFW DME DoH DHFW DME DoH DHFW Thousand) % Share Services Primary Care Services 3585393 464770 4050163 22.20 Disease Control 2389796 2389796 13.10 Family Welfare 201347 3427166 3628513 19.89 Total Primary Care 10068472 55.19 Secondary 1846532 126474 1973006 10.81 Tertiary 241649 1957271 2198920 12.05 Total Services 14240398 78.05 Capital Expenditure 109740 3000 112740 0.62 Direction & Administration 82891 226813 647406 30873 517668 1505651 8.25 Education and Research 45701 1006217 25158 129732 39028 1245836 6.83 Manufacture of Drugs, Vaccines 119990 29057 149047 0.82 Drug, Food and Water Quality 600 65442 66042 0.36 Loans 810000 810000 4.44 Total (Rs thousand) 2218039 4011476 7101795 120590 654991 65442 4072421 18244754 100.00 % Share 12.16 21.99 38.93 0.66 3.59 0.36 22.32 100.00 28